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FDD Talk 2013: Average Gross Sales, Cost of Goods Sold, and Gross Profit of Zounds Hearing Centers (2013 FDD)

by Franchise Chatter on December 24, 2013

in Franchise Earnings, Retail Franchise



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Highlights of Zounds Hearing Centers’ Item 19 Financial Performance Representations (2013 FDD)

  • Zounds Hearing Centers are business to consumer franchises that provide hearing screening, fitting, and sale of hearing aids.
  • The company offers franchises for the right to own and operate two different types of Zounds Hearing Centers, namely:
  • (Zounds Hearing Centersi) a traditional Center that is operated at a retail/commercial location that the franchisor expects will generate the majority of its business from general advertising/solicitation and walk-in traffic; and
  • (ii) a Center that is located at, within, or nearby a medical office/complex that is only offered to a group of primary care physicians, or physicians of other practices and specialties (each a “Physician Investment Group”), which the franchisor expects will generate a sizable portion of its business from physician referrals.
  • This Item sets forth the average Gross Sales, as well as the average Cost of Goods Sold (or “COGS”) and Gross Profit, of the following Zounds Hearing Centers over the period beginning November 1, 2011 and ending October 31, 2012 (the “Measurement Period”):
  • (i) nine Centers that were operated full-time throughout the Measurement Period by the franchisor’s Affiliate; and
  • (ii) five additional Centers that were operated full-time for part of the Measurement Period by the franchisor’s Affiliate before being sold to one of the company’s franchisees at some point during the Measurement Period (collectively, “Representative Centers”).
  • Each of the Representative Centers operates a substantially similar business to the franchised business being offered in the Franchise Disclosure Document, and these Representative Centers operated on a full-time basis throughout the entire Measurement Period.
  • The franchisor excluded the financial information of seven Affiliate-owned Centers and one additional Center that was sold by the franchisor’s Affiliate to a franchisee during the Measurement Period because these eight Centers were not open and operating on a full-time basis during the Measurement Period.
  • “Gross Sales” includes all revenues and receipts from the sale of all services and products from each of the Representative Centers, whether for cash or credit, and income of every kind related to the Representative Centers during the Measurement Period, but does not include sales taxes or other taxes collected from customers by you for transmittal to the appropriate taxing authority.
  • “Average Gross Sales” means the cumulative Gross Sales of all the Representative Centers divided by the total number of Representative Centers.
  • Of the 14 Representative Centers, 4 (or 29%) of the Centers sold more than the Average Gross Sales during the Measurement Period, and 10 (or 71%) of the Centers sold less than this average.
  • “Cost of Goods Sold” or “COGS” means the amounts that each Representative Center expended on hearing aid devices and other inventory items that were sold during the Measurement Period.
  • “Average Cost of Goods Sold” means the cumulative COGS of all the Representative Centers divided by the total number of Representative Centers.
  • Of the 14 Representative Centers, 10 (or 71%) of the Centers had lower COGS than the Average Cost of Goods Sold during the Measurement Period, and 4 (or 29%) of the Centers had higher COGS than this average.
  • For each Representative Center, “Gross Profit” means that Center’s Gross Sales less its Cost of Goods Sold.
  • “Average Gross Profit” is calculated by taking the total Gross Profit earned by all of the Representative Centers during the Measurement Period, and dividing that figure by the total number of Representative Centers.
  • Of the 14 Representative Centers, 4 (or 29%) of the Centers had a higher Gross Profit than the Average Gross Profit over the Measurement Period, and 10 (or 71%) of the Centers had a lower Gross Profit than this average.
  • “Percentage of Gross Sales” for each Representative Center means the Gross Profit of that Center divided by that Center’s Gross Sales.  (Ambrosio’s note:  This is more commonly referred to as Gross Profit Percentage or Gross Margin.)
  • “Average Percentage of Gross Sales” is calculated by taking the sum of the Gross Profit of all the Representative Centers during the Measurement Period, and dividing that figure by the total Gross Sales of all the Representative Centers during the Measurement Period.
  • Of the 14 Representative Centers, 7 (or 50%) of the Centers had a higher Percentage of Gross Sales than the Average Percentage of Gross Sales over the Measurement Period, and 7 (or 50%) of the Centers had a lower Percentage of Gross Sales than this average.


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